The reality of Labour's housing policy

Labour has carefully crafted an identity this election as the party of housing. But if you look at the details, what they’re proposing is terrifying for the average person.

By Lindsey Garrett of the New Era Estate

It’s not fair to say the whole Labour programme is bad. Banning letting agent fees to tenants is essential, but it is minor in impact. A third of tenants move each year, incurring all sorts of outrageous agent fees, but while Labour calculates tenants will save over £600 each (on average) that doesn’t quite add up.

This presumes Labour’s proposals on security of tenure won’t have an effect. If we’re more secure, then fewer people will move and fewer fees will be incurred anyway. Labour also has kept in the small print that this saving is divided over five years rather than per year and the Bill they introduced in parliament wasn’t even a ban on fees but a cap of about £50.

So renters’ votes are expected to be bought for policy that is at best worth about £2 per week.

This is why it’s not much; because for tenants who are paying 40% or more of their incomes on rents - living in awful conditions or putting up with borderline criminal landlords just to keep the rent bill down - then £2 a week isn’t going to cut it.

Labour has no plan to solve the housing crisis. Their big idea, the Lyons Report, put together a range of managerial, technical measures that are all broadly welcome, but they add up to not enough. They aim for Britain to be building 200,000 new homes per year by the end of the parliament. It sounds good but it’s less than any post-war government until Thatcher.

Worse than this, their own analysis is that demand is rising by 243,000 homes per year and that there is outstanding demand for housing today of one million homes. Labour says we need 2.2 million homes in the next parliament but proposes building much less than half of that.

If you don’t build enough homes, the market price will go up. Labour’s housing policy will drive up house prices, land prices and rents, putting tenants under increasing pressure. As land prices go up, more and more landlords will want to take the money, just as our landlord did on the New Era Estate.

So if this party that wants to rule us explicitly has as its policy to make the underlying housing crisis worse, then what respite are they offering to keep rents down and extend our security of tenure? The answer is none.

Labour’s proposal is to give all tenants the right to three years of tenure security without obliging them to commit to staying three years. Sounds OK but only because security today is a pathetic six months. And it wouldn’t protect me or my neighbours because we have been here for more than three years. Am I supposed to move my daughter from school to school every 3 years? Are renters’ children to be condemned to regular upheaval in their education?

But their policy is much worse than this. Their 3-year proposal is to include a six-month break clause. Every landlord in the country will be told that they can put the rent up as much as they like, but only if they get rid of their tenant every six months. Labour openly plans to create a whole package of extra reasons a landlord can evict you, get-out clauses so that landlords are protected from Labour’s own 3-year tenure policy.

So firstly Labour is creating a new set of opportunities to evict people without any tenant fault – during a so-called secure period, and secondly they are proposing to create a market that financially incentivises using those new eviction powers.

Labour’s rent capping proposal is that incentive to evict. By restricting rent rises within a tenancy but not doing so between tenancies, they are dangling money in front of landlords and saying that all they have to do to get the cash is to make someone homeless. Labour’s proposals won’t keep rents down, because between tenancies the rents will just keep up with the market price.

And with increased numbers of evictions, tenants will have to pay letting agent fees more often. So even if they are capped at £50, you might find you’re paying it every six months, so not quite saving the £2-a-week you were promised.

Labour is not proposing to fix the housing crisis and they are offering no respite to tenants in terms of real security of tenure or affordability. There is a package of policies that would both solve the housing crisis but Labour refuses to discuss them.

End no-fault evictions. Landlords are not renting people a TV or a car, they’re renting a home and that has implications that a far more profound than money. It affects health, education and a hundred other things. As Green MP Caroline Lucas said recently, “It’s hard to get any aspect of your life right if you don’t have a safe, secure and affordable home”. Yes landlords should be able to evict tenants who don’t pay the rent, but the nature of rental investment should be long term if it is to be fit for purpose. You are renting a home, not a building.

Minimum decency standards. If conditions are poor then tenants should have a right to withhold a fair proportion of the rent. If a landlord refuses to correct a problem, then the tenant should be free to do so and deduct the costs from the rent. Landlords who persist in making people live in poor conditions should have their property taken away, a power that already exists but which is rarely used. Landlords should not be able to make people live in squalor in return for a cheaper rent.

A national register of landlords (which is Labour policy), with a licensing regime that means unfit landlords are barred from the industry.

Rent control and a landlord tax. Rents are too high now, often at exploitative levels. We need a system of rent controls where landlords have a choice of either abiding by a rent cap, or if they don’t, then paying a rent tax – a Robin Hood Tax for Renters – that funds the building of public housing. And this tax should be set at a level where it recoups the total Housing Benefit paid to private landlords the previous year.

This rent tax, which has been advocated by Generation Rent, would raise £9 billion for social housing. 90,000 new homes a year provided by councils and housing associations. And this is what will bring rents down, because building these homes will reduce demand in the private sector by giving trapped private renters another option. And it will bring down the Housing Benefit bill sharply, meaning the taxpayer saves money.

A massive increase in the public housebuilding budget is the only way to increase total housebuilding quickly. Private developers sell homes at the market price, they don’t voluntarily reduce their prices out of some sense of philanthropy. Private developers make more money when there is undersupply because it inflates land and house prices. Private developers are not the answer to housing supply.

The market price is the problem, it’s too high because of the overlap of the domestic housing market and the global investment market. There’s almost no better return you can get with so little risk than putting your money in the UK property sector, particularly in London and the South East, and this drives up the market prices.

Housing is a necessary utility, like water, but this utility is in short supply. If people profiteered from a shortage in supply of water there would be riots. It would rightly be seen as immoral and unjust. But profiteering from the shortage of supply of homes is not just normal but encouraged by the government and the opposition. Empty homes are offensive and immoral. Any home that is empty should be compulsorily purchased and the owner fined a proportion of the purchase price that negates any capital gain. The centuries-old squatters’ rights abolished recently should be returned in order to discourage leaving homes empty, and the “rent a room” scheme tax break for homeowners for taking in a lodger should be tripled, with the target of bringing 250,000 new spare rooms into occupation. Social and private landlords should be barred from evicting tenants who take in a lodger as long as it doesn’t lead to other breaches of the law or the tenancy agreement and as long as the income is properly declared.

Politicians have tortured themselves over how to engage communities in accepting new housebuilding, pandering to NIMBYs to the point where it becomes perversely difficult to build homes in marginal parliamentary seats or councils. Stop pandering. Allow developers to fund a one-off council tax discount for anyone who lives near a housing or major infrastructure development. It won’t change the mind of one NIMBY, but it will create another group of people writing to councillors and MPs, saying they do want their Council Tax paid by a developer for a year. It will give politicians the cover they need to approve development, because renters can’t wait for them to develop the courage to just do the right thing.

No-one has the choice to say that they don’t want an investment, they just want a home to live in. So we also need a secondary, cost price housing market, another policy that Generation Rent has developed. A growing, self-funding stock of homes that are built and sold for cost price – paid for by private mortgages - and are only ever allowed to be sold again at cost price and with a rent cap that provides a fair return at that cost price but no more. People deserve the opportunity to forego the cost of investing in property and simply live affordably if that’s what they want.

And renters deserve to have a return on the savings they do have. The taxpayer is subsidising interest payments to pensioners on their savings – money mostly going to people who already own property - but not one penny of interest is paid to tenants on the £3 billion of tenancy deposits that is held. This money should be used to capitalise a housing and infrastructure investment bank. Tenants should share the profits generated from the investment of their money, and it should be wrapped up in an ISA-style vehicle so that the interest is tax free. And just like an ISA, tenants should be able to top up their savings.

This is a package of policies that would provide security, affordability and decent conditions for tenants. It would enable tenants to save and to have more financial stability. It would help tenants save for a mortgage deposit if they want one, while at the same time bringing down house prices. And it would help tenants move into council or housing association housing if that’s what they want or need.

But Labour, just like the Conservatives and LibDems, opposes these policies. They all argue that if you did this landlords would make less money and would leave the market, reducing the supply of homes available for tenants, pushing rents up. This just doesn’t make any sense, because landlords aren’t going to flatten their buildings. They will sell them, meaning house prices will reduce, which is what we need.

Landlords get £27bn of taxpayer subsidy each year through tax breaks, loopholes, Housing Benefit and simple tax evasion. This is almost three times the international development budget. This cash makes property investment more attractive and drives up land prices. If we reverse government policy so that we reduce land and property prices, more people will have an opportunity to buy their own home and building public housing will become more viable as land prices reduce.

These policies are what solving the housing crisis looks like, and Labour opposes them. And they have only one last argument remaining. They say that if you don’t vote Labour, you will get a Tory government.

If renters are going to be exploited for 30 years under a Labour government, does it really matter? The only way to get politicians to adopt housing policies worth having is to vote against them if they don’t have them. We have to stop voting for the least bad option if that option means being exploited for a generation and our children’s health, education and lifelong prosperity suffering as a consequence.

If there’s going to be coalition negotiations after polling day then I want someone negotiating on my behalf, not just bartering for ministerial chauffeurs. And the only way Labour or any other party will prioritise housing in those negotiations is if they feel the pain of losing votes over it.

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I am no fan of Labours Housing Policy, but your article is ill informed and badly written.
Mr Colban has a point, on mass it isn’t normally landlords that serve notice it’s tenants. The stats are not even close 95% Tenants serving notice, about 5% of our tenancies end because the landlord wants to sell or move back in. We have never had a landlord serve notice, to increase the rent, ever. Most tenants like the idea of long term tenancies but our average tenancy is still only 18 months.
Selective Licensing is no more than a tax on landlords & tenants. There is plenty of current legislation to deal with bad landlords, properties and tenants, most of it is never used and bad landlords carrying on Trading and bad tenants carrying on renting.
Is Generation Rent a National Campaign or is it merely serving London and the South East. I don’t recognise your problems here in South Yorkshire.

Orbital Gardens commented
2015-03-06 11:23:25 +0000

The artical correctly identifies the problem that we simply not building enough homes and all parties are simply pushing policies that sound good until you look into the real detail.

Labour completely fails the young by setting housing targets that initially sound high until you realise that they are 43,000 homes per year short of maintain the crisis at this level; never mind resolving it. This policy is actually target at getting NIMBY votes; who normally vote and stand for them at the local level as councillor opposing house building in thier area. This promise is a limit on building; the only true solution to the housing crisis.

The young people need to get involved in local politics; check what is actually happening on the ground are the people you voting for doing what they claim or simply just saying what they think will vote for, then pursuing their own agendas.

Ian Colban commented
2015-03-05 15:16:55 +0000

Hmm…surely if that was the case a much bigger percentage of tenancies would be ended by landlords, I think you are creating demons where they don’t exist.

Camilla c commented
2015-03-05 15:10:48 +0000

Sadly Mr Colban, although some landlord look at it like you do, but many do not. Some scan the market frantically to see ‘what they can get’ and those employing estate agents are definately like that. The agents job is to get as much rent as possible for the landlord. You’re right:it makes much more monetary sense for a tenant who pays promptly to keep the rent low and have the tenant in for a long time.

Ian Colban commented
2015-03-05 12:13:49 +0000

The overwhelming majority of tenancies are ended by tenants not landlords, if a tenant is paying the rent and looking after the property why would a landlord want to incur a void and the cost of re-letting? As for Private landlords selling up and leaving the PRS, yes it would bring house prices down, remember negative equity, repossessions and over supply back in the early 1990’s. Good luck if you feel that is the way to go!

I have been thinking about this too. Although 3 years is better than 1 year, who wants to move every 3 years? From a monetary point of view, as our wages are decreasing in relative terms, say we looked to downsize or move to a cheaper (note,never cheap in London) area outside of London,for a 1 bed flat, the rent would have to be some £200 cheaper PCM just to pay remunerate the money we invested in the move over the 3 year tenancy. Then it would be time to move again.